Monday , 22 October 2018

These 5 Stocks Could Crush Q1 Earnings

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…Earnings for companies in the S&P 500 are expected to grow 17.3% in the first quarter, with sales up 10%. These rates represent the fastest pace of growth since the first quarter of 2011. [In this article we have identified only stocks]…that have a ‘Strong Buy’ and ‘Moderate Buy’ analyst consensus rating [and,] from the generated results, we scanned for stocks with notable upside from current prices.

The original article has been edited here for length (…) and clarity ([ ])

Now let’s delve deeper into these five top stocks:

1. Zions Bancorp (ZION)

Vining Sparks’ Marty Mosby is one of the Top 10 analysts on TipRanks for his stock picking ability.

In his first-quarter earnings preview, Mosby upgraded Zions bank from ‘Buy’ to ‘Strong Buy’ stating that “We believe that ZION should be able to generate stronger revenue per share growth than the market currently anticipates, as it should benefit from both rising interest rates and their respective strategic initiatives.”  This rating comes with a $65 price target (24% upside potential).

2. T-Mobile US (TMUS)

T-Mobile US, Inc. is the third-largest wireless carrier in the US. The company is easily outpacing competitors down to: 1) a greatly improved network, and 2) targeted marketing for under-served urban and rural areas.

In 2017, for example, TMUS opened 1,500 T-Mobile-branded stores and 1,300 MetroPCS-branded stores so it’s not surprising that top Oppenheimer analyst Timothy Horan is feeling confident ahead of earnings season. In his cloud 1Q18 earnings preview, he writes that TMUS is “about the only company doing well [in adding subscribers], capturing 100% wireless subscriber flow share.” As a result, he concludes “We expect TMUS to deliver upbeat financial results following its better balance of sub growth and margins.”

Our data shows that TMUS scores straight As from the Street with 7 recent buy ratings. Moreover, the $76 average analyst price target translates into over 20% upside potential.

3. Gilead Sciences (GILD)

Following a tough couple of years, Gilead is now looking much more promising. The company suffered on the rapid decline of its key hepatitis franchise – and share prices halved from 2015 to 2017…[but,] according to top RBC Capital analyst Brian Abrahams, Gilead is now set up for some of the biggest potential beats in the biotech sector.

Abrahams is betting on “a strong 1Q for GILD, as the mix shift of HIV revenues continues to track more favorably for GILD’s long-term life cycle and the HCV market looks to be steady to slightly up.” As a result, Abrahams has a bullish $94 price target on GILD (26% upside potential).

4. Raytheon (RTN)

Defense giant Raytheon is the world’s largest producer of guided missiles. “Raytheon is seeing strong demand in missiles, missile defense, and international markets, with strength in each of these niches likely continuing since last quarter,” writes RBC Capital’s Matthew McConnell in his Q1 preview.

He sums up the stock’s setup into earnings as follows: “RTN is up +15.5% YTD, +660 bps vs peers as the defense environment remains solid and it is among the best-positioned of the defense primes for the Trump administration’s new National Defense Strategy.McConnell’s $262 price target indicates 20% upside potential from current levels.

Encouragingly, TipRanks shows that Raytheon also scores a ‘Strong Buy’ analyst consensus rating. In the last three months, RTN has received 7 buy ratings vs only 1 hold rating. The average price target of these analysts works out at $235.

5. Amazon (AMZN)

Goldman Sachs has picked Amazon as one of its top 7 stocks for this earnings season…[stating] “Consensus forecasts double-digit sales growth in energy, information technology, and materials. Strong top-line growth is consistent with solid economic activity in the first quarter.”

Overall the Street is very bullish on Amazon right now. In the last three months, 37 out of 39 analysts have published ‘Buy’ ratings on the stock. Moreover, analysts (on average) are predicting further upside from current share prices of 18%. This is despite the fact that the stock is already trading above $1460.

Five-star RBC Capital analyst Mark Mahaney explains: “Even though AMZN has consistently traded at a premium valuation level (average forward P/E multiple of 35–40x+ since 2007), its sector-leading forward EPS growth outlook and its high EPS quality (very high FCF conversion) warrant, in our opinion, a considerable market multiple premium.”

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